NLC today released its financial and operational results for the second quarter of fiscal year 2024, ended September 30, 2023. All information is unaudited.
NLC reported net earnings for the quarter of $58.3 million, which is consistent with Q2 of fiscal year 2023. The dividend paid by NLC to the Government of Newfoundland and Labrador totalled $59.0 million for the quarter, $1.5 million lower than Q2 of the prior year. The dividend is lower in Q2 of this year due to the timing of payments.
“Market conditions in the second quarter were stronger than in the first quarter, however given the broader economic conditions, the market remained sluggish,” said Bruce Keating, NLC President and CEO. “With the impact that inflation rates and interest rates are having on consumer disposable income, conditions may continue to be softer, yet we are cautiously optimistic that conditions
Beverage alcohol sales for Q2 were $83.6 million, up 1.4% from the prior year. The increase is mainly due to higher beer and ready-to-drink (RTD) sales. Compared with Q2 of 2023, RTD sales increased 4.6%, beer sales increased 4.1%, and spirit sales increased 1.0%. Wine sales were down 0.3% compared to Q2 of 2023.
Sales through NLC’s corporate stores were up 2.3% compared to Q2 of the prior year, while Liquor Express outlets across the province experienced an increase of 0.4% compared with Q2 of the prior year. Sales through licensees increased 1.5% compared to Q2 of 2023.
In addition to direct sales, NLC earns commissions on the sale of beer through Brewers’ Agents. These commissions for Q2 totalled $20.1 million, down 3.3% compared to Q2 of fiscal year 2023.
Liquor store renovations continued during Q2. In the past three years, NLC has renovated 14 Liquor stores with various upgrades including new flooring, energy efficient lighting, digital monitors, expanded cooler space, and enhanced store layout and design. NLC’s investment towards an enhanced customer experience during Q2 also included the continued rollout to all NLC retail team members of the Graff Retail sales training program, Ready to Serve, designed specifically for the beverage alcohol industry. NLC continued to highlight and support local business throughout Q2 by listing 45 beverage alcohol products from local producers.
NLC also featured local beverage alcohol products along with a local restaurant within the inaugural edition of Enjoy magazine. In September, The Newfoundland Distillery Company spoke at a national beverage alcohol conference hosted by NLC, allowing the local producer to showcase its products to beverage alcohol jurisdictions from across the country.
Cannabis sales through licensed cannabis retailers (LCRs) totalled $23.1 million in Q2, an increase of 30.3% over Q2 of the prior year. Total retail cannabis sales in Q2, including online sales, were $23.2 million.
Category growth was driven by vape, ground/milled and whole flower products. Cannabis vape products, which launched in Q3 last year, sold $3.1M in Q2 this year and represented 13.4% share of sales.
Cannabis NL listed 37 products through local cannabis producers during Q2, and was pleased to welcome four new LCRs, those being in the towns of Baie Verte, Glovertown, Portugal Cove-St. Philips, and Springdale. As of the end of Q2 there were 47 LCRs in Newfoundland and Labrador compared to 39 one year prior.
Rock Spirits produced 82,400 cases of spirits and 3,100 cases of RTDs and beer during Q2. Spirits production was consistent with the previous year, while RTD and beer production decreased 70% compared to Q2 of 2023, primarily due to the timing of production.
Rock Spirits continues to seek out local and international partnership opportunities. During Q2, Rock Spirits began producing Marlin Spike Rum and RTDs.
NLC is committed to providing systematic and thorough regulatory oversight for beverage alcohol and cannabis to ensure public safety and provide a safe and secure supply of cannabis to the province. In Q2, NLC conducted 932 inspections on liquor establishments and cannabis retailers, as it continues to work closely with the licensee community. This 11% decrease compared to Q2 in fiscal year 2023, is due to a change in availability of human resources in the department during the Q2 2024 period, and is expected to balance out in the coming months.
As a result of NLC’s ongoing enforcement and education efforts and continued growth in legal retail cannabis outlets, NLC’s Regulatory Enforcement team did not seize any illicit cannabis products during Q2. With strong enforcement and investigatory plans being implemented, this may be an encouraging sign that the black market has significantly decreased, and that the goal of keeping profits out of the hands of criminals is being achieved.
As a responsible retailer, NLC continues to build upon its educational campaigns and training programs to ensure public safety. During Q2, NLC relaunched its Check 25 I.D. campaign, which includes updated awareness materials, and the development of an enhanced training video for staff. Through the program, Liquor Store and Liquor Express staff are trained to check identification of customers who look 25 years of age or younger to ensure they are of legal age to purchase beverage alcohol. The program also provides staff training on how to check and verify valid forms of IDs, as well as the challenge and refusal process for anyone who appears to be under the influence.
NLC continues to support charities and non-profit organizations focused on encouraging the responsible use of beverage alcohol and cannabis, and addressing/reducing negative impacts. NLC has once again partnered with MADD Canada as a Provincial Sponsor of the 2023 School Program. Through NLC’s contribution, MADD Canada will present important anti-impairment messages to thousands of students throughout Newfoundland and Labrador.
To ensure that the corporation is delivering on its mandate, NLC carried out a public survey during Q2. Overall, the survey results are positive and provide a clear baseline for the corporation to continue to build upon its current efforts to provide customer excellence, and to meet and exceed its ongoing commitment to support the province and its people. NLC was pleased to host a national Social Responsibility Conference during Q2, which included participants from across the country. The objective of the conference was to share ideas and experiences on how to be exemplary corporate citizens in areas including environmental sustainability, community, and corporate governance. Discussions also centered on jurisdictional efforts towards addressing and reducing any negative effects of alcohol use.
NLC is also taking measures to ensure its responsibility to environmental sustainability. During Q2, a waste management audit was conducted on NLC’s office locations and distribution centre, along with Rock Spirits’ manufacturing facility, allowing NLC to identify areas for reducing its impact and improving efficiency.
To further its commitment to diversity, inclusion and belonging, NLC recognized the National Day for Truth and Reconciliation by closing its stores, office locations, and the distribution centre to acknowledge and remember residential school survivors and victims. NLC employees participated in exercises and virtual sessions provided by the National Centre for Truth and Reconciliation to facilitate learning for Canadians on topics related to Truth and Reconciliation. NLC also contributed to Orange Shirt Day with a donation to First Light Friendship Centre to provide essential support to events supporting survivors and the establishment of a Residential School Memorial Garden.
During the quarter, NLC’s Board of Directors also took additional steps to strengthen corporate governance by reviewing and updating the corporation’s by-laws, updating the terms of reference for the committees of the Board, approving changes to NLC’s Enterprise Risk Management Framework, and taking steps to strengthen oversight of and assurance concerning NLC’s regulatory activities.
As President and CEO Bruce Keating said, “We will continue to work on all fronts to make NLC the very best organization it can be – for our customers, for our 650 employees and for the people of the province. We have continued to focus on our customers and delivering on our financial goals. As importantly, we are taking important steps to balance purpose and profit, and earn the public’s trust in everything we do, including our important roles in regulating the liquor and cannabis industries; social responsibility; corporate governance; diversity, inclusion and belonging; and as a corporation proud to be owned by the people of Newfoundland and Labrador.”
NLC is a Crown Corporation of the Government of Newfoundland and Labrador with responsibility through the Liquor Corporation Act, the Liquor Control Act, and the Cannabis Control Act for the importation, sale, distribution and management of beverage alcohol and cannabis, and for the delivery of programs that promote safe, responsible consumption of alcohol and cannabis.
NLC is one of the largest retailers in the province. Through 29 corporate retail locations, 145 Liquor Express stores, more than 600 Brewer’s Agent outlets, and over 1,400 restaurants, lounges and other licensees, along with private order services, NLC offers over 4,000 products per year to consumers and its retail partners from more than 20 countries. It also regulates and distributes to 47 licensed cannabis retailers across the province, and offers customers a secure, legal online environment for cannabis purchases via ShopCannabisNL.com. NLC operates a 77,000 square foot distribution centre, as well as a manufacturing operation, Rock Spirits. The facility, which runs world-class blending, bottling and canning operations, ships to more than 30 countries around the world and has been in operation for over 65 years.
NLC operates with the expectation that it will generate revenue for the Government of Newfoundland and Labrador, with 100% of its profits reinvested in the province to fund key public services. NLC aspires to build trust in everything it does - with customers, employees, retailers, commercial partners and communities, along with Government, to ensure a stronger Newfoundland and Labrador.